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17 Januar 2019

Crypto Broker Weekly Rotation Report

Yara Ainsworth

Yara Ainsworth

Head of Marketing und Communications bei Crypto Finance AG

Über den Autor

This is our Crypto Broker Weekly Rotation Report, directly from the Crypto Broker trading floor to provide extensive insights into the crypto asset market, including quantitative data analysis, macro market comments, technical chart analysis, and rotation (sector) analysis. All in all, this gives a good overview of different practices to help you evaluate different market sectors. A PDF version of the report can be found at the bottom of this page.

Should you wish to receive this weekly report by email, introduced in January 2019, you may subscribe below.

Contents

1 Rotation Analysis

2 Market Analysis

3 Top Ten Comparison

4 Volatility and Correlation Comparison

5 ETHBTC 4h Technical Chart Analysis

6 Market Cap Overview

Glossary

 

1 Rotation Analysis

We would like to begin by focusing on the correlation matrix on page 2. This is the first time in weeks where we see two tokens showing a negative correlation to each other. TRX and XLM have a correlation of -0.3. The tokens stem from completely different sectors – which makes sense. As we are not doing a sector analysis, we cannot confirm that the two sectors of these coins are also negatively correlated. In general, we see on our correlation chart (on page 3) that a small widening is in process.

In our last report, we mentioned the outstanding performance to the upside of the TRX token. TRX got a good shaking during the past seven days and lost all its gains from the previous week. We have spotted some close followers on the loser table: LTC with -23 percent and ADA with -18 percent. The most volatile token (BCH) remained relatively stable. As a side note, since the middle of December 2018, BCH has shown a volatility against USD of more than 200 percent.

The time has come to call out for rotation trades. The numbers are indicating quite clearly a rotation out of alt coins into bitcoin. Please refer to our MACD charts on page 6, where you can see that bitcoin has turned bullish versus alt coins and the ranks 2 to 10 have turned bearish. The so-called „shit coins“ are in neutral territory. Since we have a high disturbance within the sectors of top 10 and 11-50 ranks, which is visible in the advance decline line (in grey) on the chart on page 5, we will solely focus on the smoothed out line (in purple). That line is trending just below the 0.5 level, which indicates that we are seeing a decline for more then half of the coins within the two sectors.

By the way, in case you follow the crypto trading twitter community, you might have been under the impression that the majority of traders are mentioning pumps of alt coins. This is also shown in our MACD chart for the ranks 11 to 50. But do not get fooled by all those pump tweets. There are only a handful of tokens in the „shit coin“ sector that are demonstrating some good performances. If you take a look at our broad analysis, you will see that alt coins are looking rather weak right now.

 

2 Market Analysis

After a pleasant start to the new year, crypto hodlers witnessed the first intense moment in 2019 as the short-term overbought cryptomarket sold off heavily on January 10. While there was no obvious fundamental reason behind the sudden drop, it did demonstrate that the low volume market remains vulnerable to short-term corrections and that there is still more time required for a groundbreaking change in sentiment. The short-term trend break put an end to the corrective rally the market had been enjoying since mid-December. Consequently, cryptocurrencies that demonstrated solid gains throughout the past weeks such as Ethereum, Bitcoin Cash, and Litecoin suffered the most. Ethereum’s drop sub $120 enabled XRP to retake the second spot in terms of market cap. With a difference of only about $100 million, these two could remain in a battle for number two for a while. Bitcoin market share remains stable while the number of listed cryptoassets grows nearly on a daily basis.

In addition to the market moves, the year really kicked-off with some interesting developments. After the completion of its first funding round just recently, Bakkt announced an expansion of its risk management, compliance, and treasury operations this week by acquiring Rosenthal Collins Group, a well-respected independent futures commission merchant. But the big news this week was for sure that a Swiss Bank now offers a custody solution for digital assets to financial intermediaries such as banks and asset managers. This certainly strengthens the Swiss crypto industry and may send a wave around the globe. Big crypto exchanges also „don’t strike roots“. Bitfinex introduced trading in RSK Infrastructure Framework (RIF) tokens, which are currently trading below ICO price, and Binance officially launched their GBP/EUR exchange. Key news, which to date haven’t had much effect on the price, was that ETH suffered a set-back as Ethereum Core Developers and the Ethereum Security Community announced in a statement just hours before the scheduled and long awaited Constantinople upgrade that they had decided to postpone the hard fork (again) after security researchers identified a potential vulnerability in one of the software upgrades.

 

3 Top Ten Comparison

Table 1: Data source: Coinmarketcap; change to last week in parentheses
Table 1: Data source: Coinmarketcap; change to last week in parentheses

 

Table 2: Data source: Coinmarketcap; change to last week in parentheses
Table 2: Data source: Coinmarketcap; change to last week in parentheses

 

4 Volatility and Correlation Comparison

Figure 1: Volatility comparison; Data source: Coinmarketcap
Figure 1: Volatility comparison; Data source: Coinmarketcap

 

Figure 2: Correlation comparison; Data source: Coinmarketcap
Figure 2: Correlation comparison; Data source: Coinmarketcap

 

5 ETHBTC 4h Technical Chart Analysis

Figure 3: Data source: Bit1nex; Chartsystem: Tradingview
Figure 3: Data source: Bit1nex; Chartsystem: Tradingview

ETH led the way

ETHBTC did not spend a lot of time in the resistance zone as we predicted in our last report. The current structure does not look too healthy. We are only 7 percent away from the recent low. If we break it to the downside, it will send a bearish signal to the market and we can expect to trade lower toward the support zone.

First alarm bells should go off when we trade through the red line, which represents two weekly closings and also corresponds with two rejection points where the market bounced from it.

Our conclusion is that long positions should be very careful and set their stop at around 0.03150 ETHBTC. Our conviction level is not very high for long positions due to the fact that we are already seeing rotation signs on our MACD and advanced decline line chart.

 

6 Market Cap Overview

Figure 4: Market capitalisation overview; Data source: Coinmarketcap
Figure 4: Market capitalisation overview; Data source: Coinmarketcap

 

Glossary

Advance Decline Line – the Advance Decline Line shows the ratio of coins for which the market cap increased relative to the market cap of BTC for each day.
ATH – all time high (maximum lookback period of 730€ days).
Data Source – tables and charts are based on daily close prices provided by Coinmarketcap.
EWMA – exponentially weighted moving average.
MACD – moving average convergence/divergence is a popular technical indicator to identify trends in the underlying instrument. It consists of the MACD and signal line, and the area shown in the background. The MACD line (strong) is the difference of two exponential moving averages, which are defined by the first and second parameter of the indicator. The signal line (weak) is the exponential moving average of the MACD line defined by the third parameter. The area in the background illustrates the difference between the MACD line and the signal line.
Pearson Correlation – quantifies the linear relationship between two variables.
Spearman Correlation – quantifies the monotonic relationship between two variables. As such, the Spearman Correlation is based on the ranked values of each variable and is used to detect non-linear relationships between the two.

Source Section 2 Market Analysisvision&

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